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New low for fixed-rate mortgages even for borrowers with small deposits

Written by : News | Tue 17th Feb 2015

Rates of interest on fixed-rate mortgages have dropped to brand-new lows, with First Direct and Barclays engaged in a war this is certainly pushing the price down even for all those buyers with smaller deposits.

The cuts come after the Bank of England’s monetary policy voted, yet again, to put up base price at 0.5per cent – where they have now stood since March 2009. First Direct is cutting the price on its 10-year fix from 3.49% to 2.89%, leapfrogging a 2.94% deal launched by Barclays earlier this week.

But Barclays is the leader for new buyers wanting to fix terms for five years, with discounts starting at 2.29%, a cut of 0.1% from a week ago. First Direct has also taken 0.2% off at 2.59% until 2020.

As usual, these deals tend to be reserved for those with a big deposit, normally 35% or more. But loan providers also have begun to cut prices for consumers able to stump up 10%. For instance, Barclays has cut its fix five-year terms with a 10% deposit from 4.38% to 4.05%, while its two-year fix with a 15% deposit goes down from 2.63% to 2.49%.

The cuts come amid the sign that the cooling off in house prices could be over. Halifax said that nationwide prices jumped by 2% in January, taking the average house price to £193,130. "These improvements may indicate that the recent declines in mortgage prices, the reform of stamp duty and also the very first increases in genuine profits for a long time are supplying a good start to the market. It really is, nevertheless, too-early to draw any conclusions which can be firm" said a spokesman.

Some specialists reckon that the Bank of England will hold the base rate into 2016. The Centre for Economics and Business Research stated: "The headline rate of inflation, as assessed because of the Consumer Price Index, dropped to 0.5% in December and, based on figures through the British Retail Consortium, food rates plunged the quickest in eight years in January. This along with additional falls into the price of automobile fuels will probably see consumer prices rising, edging the UK economy nearer to deflation. As such it looks progressively unlikely the Bank of England will raise the base rate in 2015.